Investor Weekly News Update | May 22, 2023

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Investor
Weekly
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Week of…
May 22, 2023
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Weekly Report
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Blackstone Sells IBS Software Stake to Apax for $450 Million
Source: https://techcrunch.com/2023/05/15/blackstone-sells-ibs-software-stake-to-apax-for-450-million/
● Blackstone has reached a definitive agreement to sell its stake in the Indian SaaS startup IBS Software to Apax
for $450 million, the three said Monday, the latest in a series of late-stage deal activities among IPO-ready
firms.
● Blackstone acquired about 40% stake in IBS Software, from General Atlantic, in 2015 for $170 million.
Blackstone was reportedly looking to sell this stake for over $1.2 billion, according to earlier local media
reports. IBS Software has raised $680 million to date in primary and secondary transactions, according to
market intelligence firm Tracxn.
● IBS Software offers a range of software solutions to airlines, logistics and hospitality companies. The
Kerala-based startup has a global presence with offices in the U.S., Canada, Australia, Dubai, Japan, South
Korea and the U.K. It counts Cathay Pacific Airways, Etihad Airways, Air Canada, DHL, FedEx, Heathrow,
JetBlue, Lufthansa, Qantas, Singapore Airlines and Virgin Atlantic among its customers, according to its
website.
● “Having closely monitored the travel software sector over the last several years, IBS Software stood out to us
as uniquely positioned in the industry, offering a next-gen software suite that we believe is truly unrivalled.
Over the last two decades, IBS Software has invested in products, innovation, and culture, while continuing to
scale the business,” said Jason Wright, partner at Apax, in a statement.

Weekly Report
The Decline of Affordable
Housing in the U.S.
Source:
https://www.visualcapitalist.com/sp
/the-decline-of-affordable-housing-i
n-the-us/

Weekly Report
cont. The Decline of Affordable Housing in the U.S.
Source: https://www.visualcapitalist.com/sp/the-decline-of-affordable-housing-in-the-us/

Weekly Report
cont. The Decline of Affordable Housing in the U.S.
Source: https://www.visualcapitalist.com/sp/the-decline-of-affordable-housing-in-the-us/
What’s causing the erosion of housing affordability in the U.S.?
● The U.S. is not building enough houses to keep pace with population growth. And you can see this in the housing
start data. In January 1959, there were around 1.7 million housing starts, compared to January 2023, when there
were 1.3 million. And this decrease happened despite the fact that the U.S. population nearly doubled, from 176 to
335 million.
● Lots of different forces are working together at the local level to stop more houses from being built. Space is one
reason. Local zoning laws that limit the construction of multi-family homes is another culprit. The COVID-19
pandemic has also caused global supply chain issues, leading to rising material costs for housing.
● And the icing on the cake? Rising interest rates are making it even harder for first-time homebuyers to enter the
market.

Weekly Report
Multifamily Cap Rates Have Begun to Stabilize
Source: https://www.connectcre.com/stories/multifamily-cap-rates-have-begun-to-stabilize/
● For the first time since the Federal Reserve began raising interest rates in early 2022, underwriting assumptions for prime
multifamily assets are beginning to stabilize, CBRE reported. The average multifamily going-in cap rate increased by 23 basis
points to 4.72% in the first quarter if 2023.
● This follows increases of 39, 36 and 38 bps in the three preceding quarters and marks the first significant quarterly
deceleration in cap rate expansion since the Fed began its latest round of rate hikes. Similarly, other metrics such as unlevered
IRR targets, exit cap rates and rent growth also decelerated in Q1.
● Since Q1 2022, the average going-in cap rate has expanded by 136 bps and now eclipses the pre-pandemic average by 51 bps.
“Though further expansion is expected, underwriting assumptions for prime multifamily assets will likely peak in the second
half of 2023,” according to CBRE.

Weekly Report
Apartment Investment Sales Will Rebound in Time
Source: https://www.multifamilyinsiders.com/multifamily-blogs/apartment-investment-sales-will-rebound-in-time
● According to a preliminary report by CoStar Group that was recently outlined in the Wall Street Journal, apartment investment
sales totaled $14 billion in the first quarter of this year which represents a whopping 74% decline from first-quarter 2022.
The total also "was the lowest amount for any quarter since 2012, with the exception of the second quarter of 2020 when pandemic
lockdowns effectively froze the market," according to the Wall Street Journal article.
● Rising interest rates and volatility in the debt markets - including the recent failures of several regional banks - have made
transactions difficult. Slowing rent growth, the impact of a potential recession on renter demand and soaring property
insurance costs are giving buyers pause, too. As a result, while there appears to be plenty of capital looking to invest in
multifamily, a large gap generally still remains between sellers' asking prices and what buyers are willing to pay. In addition,
not many distressed properties are available for acquisition right now as those owners still have term on their loans, which
gives them the ability to wait a bit longer in hopes that the capital markets will improve and allow them to refinance their
current loans with more favorable options than are available today. Investors are waiting for these properties to become truly
distressed, and there is widespread belief that more will be on the market later in the year.
● It's quite possible that investment sales won't pick up real momentum until next year. The Federal Reserve raised interest
rates again in March, and according to the Associated Press, there is support among Fed officials for at least one more rate
hike this year.

Weekly Report
cont. Apartment Investment Sales Will Rebound in Time
Source: https://www.multifamilyinsiders.com/multifamily-blogs/apartment-investment-sales-will-rebound-in-time
● But as we gain more clarity about the interest rate outlook, which could happen later this year, sales activity will begin to rise,
and you don't have to squint hard to see the multifamily sector once again becoming a favored asset among investors. After
all, the industry remains sound. Fundamentals such as rent growth, vacancy and absorption are off of their historic rates, but
they're still at levels that signal a healthy multifamily market. That's in part because, regardless of the state of the economy,
people need a roof over their heads, and the current cost of renting a home compared to owning one is supporting
multifamily demand.
● Also boosting renter demand is the relative lack of single-family homes. According to CBRE, rising construction costs led to a
41.4% decrease in single-family home completions from 2007 to 2021. And a potential recession's impact on renter demand is
likely to be relatively minimal, as the recession, if it occurs, is not projected to be particularly deep. Companies still have
relatively strong balance sheets, which should help avoid excessive layoffs as the skilled labor market remains tight. Low
unemployment will ensure resident demand for apartments remains strong.
● Apartment communities are well-positioned to, over the long-term, have strong operating fundamentals and to deliver the
kinds of risk-adjusted returns that owners and investors are seeking.

Lesson Learned
“ I had a talk with Lane over the weekend about investment/financial strategy and he
mentioned that there is no need to further fund the life insurance policy beyond paying the
premium. Or at least he was saying not to make it a priority or worry about max funding it.
Your thoughts on this?”
“I thought the goal is to funnel everything through the policy as much as possible to “double
dip.”

Lane Kawaoka, PE
Lane@SimplePassiveCashflow.com
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Legal Notice and
Disclaimer
This presentation does not constitute the
rendering of legal advice or services. The
information being presented is intended for
informational use only and is not a substitute
for legal advice. State, national and international
laws vary, as do individual circumstances; so
always consult a qualified attorney on all legal
matters.

Investor Weekly News Update | May 22, 2023

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Investor Weekly News Update | May 22, 2023